Aspen, Merck deal includes API plants in U.S., Netherlands

South Africa's Aspen Pharmacare has announced two deals within a week that will take it from being simply the dominant player in South Africa to having a manufacturing network that stretches into the U.S. and Europe.

The drugmaker, which claims it is the world's ninth-largest generic drug manufacturer, said today it will buy an API facility from Merck & Co. ($MRK) in the U.S., along with one API facility and parts of two others in the Netherlands. It buys those as part of a $1 billion, multi-layered deal that also includes buying 11 products from Merck, known as MSD outside of the U.S. The transactions are slated to close Oct. 1.

This deal comes about a week after GlaxoSmithKline ($GSK) said it was in discussions with Aspen to sell it a large manufacturing facility in France as part of a deal for Aspen to buy GlaxoSmithKline's older thrombosis drug brands, Arixtra and Fraxiparine. In fact, there is a connection between the two deals. Aspen said today that the Merck API business manufacturers heparin, the API used in Fraxiparine. The API operations also manufacturers the active ingredients for a number of the drugs which it intends to buy from Merck.

Aspen says it will pay €336 million ($438 million) for the API business and its inventory. It gets what is referred to as the Boxtel site in Oss, as well as parts of sites in Moleneind and De Geer. It also picked up an API plant in Sioux City, IA, and a sales office in Oss and one in Des Plaines, IL. The Merck API operations in the deal sold about €284 million ($370 million) worth of product last year. Aspen will have a 10-year contract to continue to manufacture some APIs for Merck and said it intends to drive down costs in the business to be more competitive.

It will then pay about $600 million for the portfolio of 11 drugs, which includes such products as hormone replacement treatments Ovestin, Sustanon and Metrigen; the anticoagulant Orgaran; and contraceptives Gracial and Novial.

Merck and Aspen put out sketchy details in February saying they were working on a deal for Aspen to buy the API operations in the Netherlands. They did not, however, hint at the breadth of the proposal. Last week, GSK, which owns a significant piece of Aspen, said it was negotiating to sell it Arixtra and Fraxiparine, a deal that would include a plant in Notre-Dame-de-Bondeville, France with about 1,000 employees.